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Exam 6: Accounting for Merchandising Businesses

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Question 61

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Which of the following accounts will only be found in the chart of accounts of a merchandising company?

A) Sales
B) Accounts Receivable
C) Merchandise Inventory
D) Accounts Payable

E) A) and D)
F) B) and C)

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Question 62

Multiple Choice

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When goods are shipped FOB destination and the seller pays the freight charges, the buyer

A) journalizes a reduction for the cost of the merchandise.
B) journalizes a reimbursement to the seller.
C) does not take a discount.
D) makes no journal entry for the freight.

E) B) and D)
F) None of the above

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Question 63

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On March 29th, customers who owe $10,500.00 for purchases made on Sonic Sales Company submit payments of $4,250.00. Journalize this event.

When the perpetual inventory system is used, the inventory sold is shown on the income statement as

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is

Retailers record all credit card sales as credit sales.

Service businesses provide services for income, while a merchandising business sells merchandise.

Sales Returns and Allowances is a contra-revenue account.

Which of the following accounts has a normal debit balance?

Freight-in is considered a cost of purchasing inventory.

Under the periodic inventory system, the journal entry to record the cost of merchandise sold at the point of sale will include the following account

The following data were extracted from the accounting records of Meridian Designs for the year ended March 31, 2014. Prepare the cost of merchandise sold section of the income statement for the year ended March 31, 2014, using the periodic method. Also determine gross profit.

In a perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is debited as part of the transaction.

Journalize the following transactions for both Abbott Co. (seller) and Dalton Co. (buyer). Assume both the companies use the perpetual inventory system.

A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750.

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. a

Using the following information, what is the amount of net sales?

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

A chart of accounts for a merchandising business